HDFC Nifty India Digital Index Fund - Direct (G): NFO Details

HDFC Nifty India Digital Index Fund - Direct (G) focuses is a passive equity scheme designed to track the Nifty India Digital Index (TRI), offering investors exposure to the digital sector of India. The Nifty India Digital Index comprises the top 30 stocks from India’s digital sector, selected based on their six-month average free-float market capitalization.

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The fund aims to deliver returns that mirror the performance of the underlying index over the long term, subject to tracking errors and before fees and expenses. This scheme predominantly invests in the equity securities that make up the Nifty India Digital Index, while also allocating a portion of assets to debt and money market instruments to manage liquidity requirements. As a passive investment, it carries lower risk compared to actively managed funds, focusing on replicating the performance of the index with minimal volatility.

Details of the NFO: HDFC Nifty India Digital Index Fund - Direct (G)

Investment Objective and Strategy

Objective:

The primary objective of the scheme is to produce returns that, subject to tracking error, are in line with the performance of the Nifty India Digital Index (TRI) (before fees and expenditures).

However,  the achievement of this investment objective is not guaranteed, and the scheme does not promise or indicate any assured returns.

Investment Strategy:

The HDFC Nifty India Digital Index Fund - Direct (G) aims to closely track the Nifty India Digital Index (TRI) by investing in the same securities as the index. This passive strategy minimizes risks associated with stock selection and fund manager decisions. The fund will regularly rebalance to maintain alignment with the index and address corporate actions in constituent companies. A small portion (around 5%) is allocated to debt and money market instruments for liquidity purposes, and derivatives like index futures and options may be used to control tracking error.

Strength and Risks - HDFC Nifty India Digital Index Fund - Direct (G)

Strengths:

HDFC Nifty India Digital Index Fund - Direct (G) has a few key strengths that makes it an attractive option for investors.

Index Tracking: The Scheme aims to closely track the performance of the Nifty India Digital Index, providing exposure to key digital and technology companies in India.

Passive Management: The Fund is passively managed, minimizing human error and focusing on replicating the Index with minimal active intervention.

Diversification: By investing in a broad range of digital sector stocks, the scheme offers diversified exposure to the fast-growing Indian digital economy.

Lower Costs: As a passive fund, the scheme generally incurs lower management fees compared to actively managed funds, benefiting long-term investors.

Risk Mitigation: The strategy of regular rebalancing and minimizing tracking error aims to provide stable returns with controlled volatility.

Risks:

HDFC Nifty India Digital Index Fund - Direct (G) also has certain risks associated with it that investors should be aware of:

Passive Investment Risk: The Scheme tracks the Nifty India Digital Index, and its performance will directly depend on the Index, with no active management to mitigate declines.

Tracking Error Risk: The Fund may experience deviations from the Index’s returns due to factors like transaction costs, corporate actions, and cash holdings.

Liquidity Risk: Circuit filters or low liquidity in stocks may hinder the Scheme’s ability to execute transactions at desired prices, impacting returns.

Equity Market Risk: Investments in equity instruments are subject to market volatility, and the Scheme may experience short-term fluctuations in value.

Derivatives and Corporate Actions Risk: The use of derivatives and corporate actions like mergers or rights issues can lead to temporary deviations from the Index’s performance.

Apart from these, there are additional risks associated, including risks related to debt instruments, credit risk, settlement delays, etc. that may affect the overall performance of the Fund.

Why Invest in HDFC Nifty India Digital Index Fund - Direct (G)?

The HDFC Nifty India Digital Index Fund - Direct (G) offers a compelling opportunity for investors looking to gain exposure to India’s digital transformation at a low cost. By tracking the Nifty India Digital Index, the fund provides a diversified portfolio of digital companies, offering the potential for long-term capital appreciation as the sector grows.

This fund is ideal for investors who prefer a passive investment strategy that aims to deliver returns in line with the overall digital market performance, without the need for active stock selection. The low tracking error strategy, along with liquidity management, ensures that the fund is both efficient and accessible. Additionally, with minimal active management and a focus on replicating the index, the fund offers a straightforward and transparent investment approach.